Over the last ten years the concept of High-Deductible Health Plans (HDHP) has become popular to talk about and for some employers to install. Many people wonder just what is a HDHP and why would I use one?
A HDHP is not anything new but the attention it is getting is. Simply, a HDHP is health insurance with a high deductible (what a covered person pays first before insurance starts to pay). To be considered a HDHP in 2015 the deductible must be at least $1300 for and individual and $2600 for a family. Because the deductible is high the cost of these plans is lower than other types of health insurance. The reason is simple, a high deductible means that fewer costs make it to the insurance company.
Some people get concerned about plans that have high deductibles and then 80% coinsurance – the employee/covered person pays 20% of costs above the deductible. Twenty percent of a $250,000 charge (which is not that hard to do in today’s health care world) is $50,000. For that reason HDHPs have what is known as a “Stop Loss” or “Out of Pocket Maximum.” This means that when a covered person has paid $6,450 as an individual or $12,900 as a family the insurance company will then pay 100% of costs.
Many times these plans are installed with Health Savings Accounts (HSA). A HSA allows employees to deposit before tax dollars into and account to pay for allowable health care expenses that are not covered by insurance. The individual/family limits for HAS contributions in 2015 are $3,350/$6,750. One nice thing about an HAS is it is not a use-it-or-lose-it proposition. Funds not used this year can be rolled over for availability in future years.
There is much more to know about HDHPs and how to use them. Any time you install a plan you want to think about all of the implications. Yes, many companies can save money, or reduce the rate of increase, in their health insurance budgets but what are the implications of such a move? Some have criticized HDHPs as actually costing more in the long run.
That is why we believe that any decision should be thoroughly analyzed before put into place. Communication is probably the most important, and underappreciated part of employee benefits. Both official and implied communication. We at KBS believe in working with our clients to make sure that all sides of a decision are considered. We want to make sure that you are happy with your benefit decisions today and in the future.